Thursday, November 25, 2004

Connecticut : State's Home Sales Plunge

But Housing Prices Continue To Climb

By KENNETH R. GOSSELIN, Courant Staff Writer

Sales of single-family homes in Greater Hartford slowed dramatically in October, the strongest sign yet that the area's hot housing market is cooling off.

But despite weaker sales, home prices in the 57-town area continued to rise in October, making double-digit gains in both average and median sales prices.

Closed sales in October were down an eye-popping 20.25 percent - to 878 from 1,101 the same month a year ago, according to the Greater Hartford Association of Realtors.

This was the fourth consecutive month of slower sales and the steepest decline so far.

Although mortgage rates remain low, economists say demand in Greater Hartford appears to be waning after three straight years of record sales.

"People that wanted to buy have already moved because of the anticipation of interest rates rising, which hasn't happened yet," said Susan Coleman, a professor of finance at the University of Hartford.

Prospects for job growth in Connecticut also remain lackluster. That means fewer people moving to Connecticut to take jobs and buy houses.

And homeowners already living in the area may be less confident about buying a starter or a larger house if they are not sure they could find another job if they lose theirs.

"We may have already satisfied much of the demand," said Ronald F. Van Winkle, a West Hartford economist.

Coleman said prices are still rising because there is still some - albeit weaker - demand in the market.

"People that are prepared to buy are willing to pay the higher prices," Coleman said.

In October, the average sale price rose 12.02 percent, to $274,733 from $245,250 from the same month a year. And the median sales price rose 11.54 percent, to $232,000 from $208,000 in October, 2003.

No one is predicting a collapse of the housing market, but economists and realty agents clearly see a slowdown coming that will rein in price increases.

"I'm not expecting a severe downturn in Connecticut's housing market," said Donald L. Klepper-Smith, a West Haven economist. "This is not 1989."

The housing market has not been flooded with new construction, and mortgage rates have not risen sharply, he said.

Mortgage rates remain much lower than many had predicted earlier this year. Many economists had expected the 30-year rate to be well above 6 percent by now.

According to Freddie Mac, the average for a 30-year, fixed-rate mortgage edged slightly lower this week to 5.72 percent, with an average 0.6 points, down from 5.74 percent last week.

But when rates rise, as economists expect they will, price increases in Greater Hartford will slow. Fewer buyers will be able to afford to buy homes whose prices had been rising at double-digit rates annually, Klepper-Smith said.

Even with weakening sales, 2004 is shaping up to be a healthy year, according to the Greater Hartford Association of Realtors.

Through October, the association reported:

Closed sales are up 3.42 percent, to 9,775 from 9,452 for the same period last year.

The average sales price rose 7.88 percent, to $262,664 from $243,479 for the same period in 2003.

New listings rose 6.04 percent to 15,857 from 14,954 in the first 10 months of 2003.

The statistics include most existing-home sales; some for-sale-by owner transactions are not included.


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